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Frequently Asked Questions
Wholly Foreign Owned Enterprises (WFOE)
A Wholly Foreign Owned Enterprise (WFOE) is a Limited Liability Company established in China by foreign investor(s). A WFOE is very much like a LLC in the USA that it requires one member only.
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The registration procedures of a Wholly Foreign Owned Enterprise (WFOE) could be divided into 3 phases: aproval phase, registration phase and post-establishment phase.
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A Wholly Foreign Owned Enterprise (WFOE) could be terminated by way of liquidation or deregistration by its investor(s) or when the conditions of termination in its Articles of Association occurs.
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China Taxation
Under the current tax system in China, there are 25 types of taxes which could be divided into 8 categories. The major ones are Business Tax, Value Added Tax and Enterprise Income Tax. More
Representative Offices are also liable for Business Tax and Enterprise Income Tax. However, a RO could be exempted if its parent company is in the manufacturing business.
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Any individual who has domicile in China or who has no domicile in China but has resided in China for one year or more shall pay Individual Income Tax on his world-wide income.
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CHINA CORPORATE INCOME TAX


CHINA TAXATION SYSTEM
Consumption Tax

(1) Taxpayers

The taxpayers of Consumption Tax include all enterprises, units, household businesses and other individuals engaged in production or importation of taxable consumer goods within the territory of the People' s Republic of China. The taxable consumer goods exported by the taxpayers are exempt from Consumption Tax, unless the taxable consumer goods are restricted by the State from exportation.

(2) Taxable items and tax rates

Table of Consumption Tax Taxable Items and Rates

Taxable items Tax rates (tax amount) Comments
1. Tobacco (1) Grade A Cigarettes (2) Grade B Cigarettes (3) Grade C Cigarettes (4) Cigars (5) Cut tobacco 50% 40% 25% 25% 30%  
2. Alcoholic drinks and alcohol
(1) white spirits made from cereal
(2) white spirits made from potatoes
(3) yellow spirits
(4) beer
(5) other alcoholic drinks
(6) alcohol
25% 15% 240 yuan per tonne 220 yuan per tonne 10% 5%  
3. Cosmetics 30%  
4. Skin-care and hair-care products 8% Perfumed soap currently taxed at 5%
5. Precious jewellery, pearls, precious jade and stones
(1) Gold and silver jewellery
(2) Other jewellery, pearls, precious jade and stones
5% 10%  
6. Firecrackers and Fireworks 15%  
7. Gasoline (1) Unleaded (2) Leaded 0.2 yuan per litre 0.28 yuan per litre  
8. Diesel 0.1 yuan per litre  
9. Motor Vehicle Tyres 10%  
10. Motor-cycles 10%  
11. Motor cars 3%,5%,8% Rate applied on the basis of the type and cylinder capacity of the car

(3) Computation of tax payable

The computation of Consumption Tax payable shall follow either the ad valorem principle or quantity-based principle. Generally, the producers of taxable consumer goods are the taxpayers and the Consumption Tax shall be paid on sales of the goods by the producers. The computing formula is:

a. Tax payable =sales amount of taxable consumer goods × Applicable tax rate , or
b. Tax payable = sales volume of taxable consumer goods × Tax amount per unit
Imported taxable consumer goods to which Ad valorem method is applied in computing the tax payable shall be assessed according to the composite assessable price and the applicable rate.

Hong Kong Head Office              Room 803, Futura Plaza, 111 How Ming Street, Kwun Tong, Hong Kong
                                                 TEL +852 2341 1444      FAX +852 2341 1414      E-mail info@bycpa.com

Shenzhen Office   TEL +86 (0755) 82684480 82684483 82684484 FAX +86 (0755) 82684481
Shanghai Office   TEL +86 (021) 64394114 64399276 FAX +86 (021) 64394414
Beijing Office   TEL +86 (010) 68748420 68748422    FAX +86 (010) 68748421  

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